Once known as Facebook’s VIP room, Instagram’s once-curated ads are becoming open to all. The Facebook-owned platform is switching on its advertising API (application programming interface), which will automate the process and remove the need for contact with a sales associate. Given Instagram’s predicted internet penetration (33.6% of internet users are expected to be on the platform by 2019), its revenue is about to skyrocket.
Perhaps the most important contributor to Instagram’s success is its mobile birth. Mobile ads are expected to make up more than 50% of all U.S. digital ad revenue in 2015 and account for more 60% of Facebook’s revenue. Furthermore, Instagram’s new revenue stream can tap into data gathered from both desktop and mobile, aka Facebook’s competitive advantage: a trove of consumer browsing data gathered from federated logins, social plugins and conversion pixels distributed across online sites. As of Q1 2015, Facebook maintained a 45% share of sites with a single sign-on, as shown in a graph from L2’s 2015 Intelligence Report: Social Platforms.
While this is great for Instagram and Facebook investors, it means the end of organic reach on Instagram is nearing. Prestige brands have especially benefited from Instagram’s relatively ad-free environment, boasting communities of half a million followers on average. All of this has happened before on Facebook: Once prestige brands built their organic communities on the social platform, it switched to a pay to play model reducing organic reach to “effectively zero.” Brands should expect the same to happen on Instagram.
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